How To Decide What Risks Are Worth Taking

Life continuously presents us with difficult choices. Do we start our own business or stay in our (relatively) safe job? Do we absorb the high cost of health insurance or risk going uncovered because we’re healthy now? Do we get the screening colonoscopy? Do we get married? Do we have children? Do we choose what’s behind door #1 or door #2?

Every choice we make, big or small, easy or difficult, has potential benefits and risks. Many times we make choices based on emotional biases born of personal experience (we won’t let anyone operate on our herniated disk because we know someone who awoke from the surgery in even worse pain). If we’re not fully aware of the source of our biases, we risk basing our decisions on flawed reasoning. What we really need is a systematic way to sort through the risks and benefits of a choice that incorporates our personal values in order to make choices that give us the best chance to obtain the best outcomes for us.

IDENTIFY THE PROBABILITY OF EACH RISK

Few choices are attended by only one risk, but luckily identifying the risks of a given choice is usually relatively straightforward, whether it’s pain, unhappiness, embarrassment, failure, death, or something else.

Identifying the likelihood of these things actually happening is much more challenging. Hard data is of course best but often isn’t available. When it’s not, it may be helpful to ask an expert’s opinion (though their estimation may be only slightly more informed than yours). Often, though, all we have to estimate risk is our own gut feeling. In such cases, it’s helpful to quantify that feeling into a concrete percentage (making a commitment this way will force you to refine your estimate, much like writing your thoughts down forces you to clarify what you think).

Once armed with some understanding of the likelihood of each risk you face, the next step is to…

IDENTIFY THE SIGNIFICANCE OF EACH RISK

This is tricky as what we deem “significant” is both subjective and objective, relative and absolute. Subjective, because people have different levels of risk tolerance. Objective, because the likelihoods of certain risks have been studied and are known in many circumstances (eg, drug side effects). Relative, because the potential benefits may outweigh the risks in one circumstance but not another (you may not be willing to risk liver failure to cure a toenail fungus, but you may be willing to take on the risk associated with donating a piece of your liver to save your child’s life). Finally, absolute, because even if you are willing to risk your life, it remains your most precious possession regardless of the benefit that risking it may bring.

To determine if you personally find a risk significant requires us to make two calculations:

Compare our personal risk tolerance to the objectively (or subjectively) assessed risk. How can you assess your tolerance for a particular risk in a meaningful way? Compare its likelihood to that of the riskiest thing you already do in your daily life. For me, this ends up being simply driving my car, which exposes me to a lifetime risk of death of approximately 1.2%. This may be only an estimate of one marker of my tolerance for risk, but it’s a helpful way of putting other risks into perspective by enabling me to think about them as multiples of my risk of death from something I do nearly every day. For example, if my risk of dying from general anesthesia is approximately 0.17% (1985 data), it’s only 1/10th my lifetime risk of dying in a car accident. If my lifetime risk of dying from smoking is approximately 8.3%, it’s 8 times more than my risk of dying in a car accident. Of course, not every risk is equally undesirable. For example, the weightiness of the risk of pain is, for most people in most circumstances, far less than the weightiness of the risk of death (though, of course, for some people—perhaps those facing terminal illness—the opposite may be true). Because the point of this comparison is to help you grade your emotional risk tolerance in a more concrete and objective way, comparing apples to oranges is entirely permissible and useful (for example, comparing your lifetime risk of dying from a car accident to your risk, say, of stroke from being anticoagulated).

Weigh the risk against the benefit. Benefit drives risk tolerance. If you stand to gain more than everyday benefit, you’ll tolerate more than everyday risk. You not only have to weigh the risks and benefits of making a particular choice, however; you have to weigh the risks and benefits of not making it. I find it helps to draw diagrams. Include two charts, one for making the choice listing out the risks and benefits and one for not making the choice listing out the risks and benefits (or more if you’re comparing multiple choices). Grade each risk and benefit to the best of your ability both in terms of probability of happening and importance to you. For example, the risk of death from anesthesia may only be 0.17% but on a scale of 1 to 10, the importance of avoiding death is probably a ten. The risk of mild pain from a cortisone shot in your shoulder may be 90% but on a scale of 1 to 10, the importance of avoiding transient pain may only be a one. Putting numbers to these risks and benefits won’t make your decision any easier but will help you decide which risks and benefits are significant enough to bother comparing.

The point of this method isn’t to convince you your gut instincts are wrong but rather to create clarity around what your gut is actually telling you. You may still end up making the decision your gut suggests (and probably will) but if you’ve gone through this exercise at least then you can point back to it if you come to question or even regret your decision (especially if the outcome is worse than what you’d hoped for) to satisfy yourself you made the best decision you could with the knowledge you had at the time.

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Thanks for this post, Alex. Having the skills to face the challenges, choices, and risks we face in this life is invaluable. For me, sometimes simply fearing that I will make the “wrong” choice in a situation nearly freezes me completely—so that I attempt to delay or avoid making the choice all together. To counter this less-than-desirable instinct on my part, I have found that it’s really helpful to ask myself, “What’s the worst-case scenario here?”, to answer that question honestly, and then to come up with a plan for how I would react, cope, or survive that worst-case scenario. Armed with preparation for even the worst possible consequence I can imagine, I find it much easier to face the situation at hand with confidence and a clear head!

This came at a good time, as I am facing making a shift in my personal life. I tend to drag my feet and just get by, but the probability and importance ideas of ranking choices are very helpful, thanks.

In this system, how do you “rank” the risk and discomfort of change vs. the comfort of the status quo? I find that change, or the great, vast “unknown,” is often a deterrent to taking a risk which might move me ahead.

Chris: That’s an excellent point. No matter how well you might try to predict the results of any choice, invariably you’ll find yourself surprised by something you didn’t anticipate. As there’s no way to quantify a risk you haven’t identified, this method won’t help you with that. On the other hand, if you can quantify all the known risks on paper in front of you, that might help you overcome the inherent resistance we all have to making changes due to inertia or fear of the unknown.

Very helpful, Alex. Gathering up information on all aspects of making an important decision is so important and can help us avoid some drastic mistakes. Putting it all down on paper makes it even more effective, as in tackling so many work or personal problems.

A checklist for getting started on those everyday tasks and problems:
Gather all the facts.
Describe the problem in detail.
List all the possible solutions.
List the advantages and disadvantages of each.
Detail what to do.
Follow through.

I know people who will over think a situation to the point of inertia. I agree that logical reasoning is advisable when contemplating major life decisions.

However, I am a risk taker, I don’t do the “what ifs” and I don’t look back. When I was a student I decided to study for the summer at the University of Warsaw from an ad in the student paper. It was the most interesting course in another culture I’ve ever studied. The course was in Polish, and I don’t speak any Polish!

On impulse I bought an alfa sports car because it looks so darn cute. My mom was beside herself; she was certain I would die a horrible death. I took an intensive defensive driving course to please her.

I joined an NGO as a volunteer in South America assisting indigenous women improve their living conditions. Two women from my association were murdered (it was political). If I had considered the risks, I likely would have stayed home.

I almost booked a trip to Paris for the weekend, but my husband thought it was reckless and a waste of money. So, I surprised him by taking him to the Eiffel tower for his birthday dinner and we stayed in Paris for two weeks.

My point is no matter what choice you make, once made, you should give into it 100%. You have one life, no rehearsals, no do overs.

Angelina: You actually remind me of my wife, who’s one of the most fearless people I know. While I like to contemplate possible outcomes beforehand, like you, she likes to jump in feet first. Though I think in some situations you’d always want to contemplate risks and benefits (eg, deciding on whether or not to have a medical procedure), in many arenas of life it’s whatever suits you best. I couldn’t agree with you more, however, that once you make a decision, don’t look back but fight forward with everything you have.

By the way, when my wife read your comment she said you sounded like her new best friend! 😉

An interesting book on this issue is “The Paradox of Choice” by Barry Schwartz. He discusses the connection between choice and happiness which isn’t as obvious as it might seem.

I’ve often “stepped off the edge” and taken life risks: some have worked out, others haven’t. I recently went back to school and got a graduate degree in my field (I’m middle aged) and while I enjoyed that a lot it would have been better economically to have gotten a job: I’ve been unemployed for eight months now with nothing in sight.

On a technical note, wouldn’t mortality data for general anesthesia in 1985 predate pulse oximetry? An anesthesiologist told me that single advance made a significant difference.

Rick: You may have been unemployed for 8 months now, but you followed a passion and came out the other end. Who’s to say you already know the final value of that decision?

Pulse oximetry became widely used in operating rooms between 1982-1983, though by some estimates it wasn’t until 1987 that its use became standard of care, so the data I quoted may indeed be slightly high by today’s standards.

Then there are times when you simply have to throw caution to the wind and go for it. However, a person can’t do that unless they have the confident in their intuitive capabilities. Personal growth happens most profoundly when we put ourselves in a place of discomfort…when we stretch ourselves beyond what we believe with are capable of.

1. Use my faith to awaken my wisdom
2. Seek advice of only those people whom I trust
3. Ask myself which path will cause me regrets even I did not take an option that takes me out of my comfort zone.
4. Trust myself that the wisdom that emerges from within me will guide me.

Of all the things the biggest motivator for me is leading a regret-free life.

For smaller decisions (what car to buy, where to go on vacation, etc), I tend to use pure logic and reason. For monumentous life altering decisions (marriage, child, career, etc), 99 times out of 100, I’ve gone with my gut feeling. I haven’t regretted any of them so far.